Wednesday, April 4, 2012

Hard Choices

Kanwal Sibal

ARMS PRCHASES ARE POLITICAL IN NATURE AND NOT SIMPLE COMMERCIAL TRANSACTIONS

The decision on the MMRCA contract has provoked a discussion on the
degree of strategic thinking that goes into arms purchases by the Indian
government. India is one of the largest arms importers; it is accepted
as a truism that arms purchases are political in nature and not simple
commercial transcations. If they are based on political considerations,
then they ought to fit into some strategic context. This much is clear.

US, Russian and European suppliers were competing for the MMRCA deal.
A huge defence deal such as this anywhere cannot be ignored by the
governments of the countries whose defence companies are involved in the
competition. Maintaining a national defence industry is a hugely
expensive business. Exports, by enlarging the market base, help greatly
to amortize costs. A defence supply relationship with a country also
creates political leverage with it. Export orders become more important
at a time when domestic orders are drying up because the political
environment is more peaceful in the West and defence budgets have been
reduced, at least in Europe. The defence industry involves many high
quality jobs, and at a time of growing unemployment, protecting existing
jobs or creating new ones is a major governmental concern. No wonder
then the governments of the countries whose companies were vying for the
MMRCA contract were active in drawing attention to the political and
strategic considerations that should weigh with India in taking its
decision.

The exclusion of the US companies at a preliminary stage invited the
rebuke from US circles that India had opted for a transaction not a
relationship. This meant that India was not thinking strategically while
taking this decision, that it was thinking purely in
commercial/technical terms. The implication here is that at times, even
if a choice were available, India should settle for what may be
relatively inferior technology for larger and longer term political and
strategic considerations. In the case of the MMRCA this would have meant
that India should have chosen one of the two US aircraft as this would
have consolidated the base of the developing US-India defence
relationship, increased levels of mutual confidence, enhanced mutual
political stakes and opened doors for higher grade technology transfers
in the future. All this would have given more substance to the declared
strategic relationship between the two countries.

In the case of Europe thereis greater sense of comfort
in dealing with them in defence matters as the Europeans are more
commercially oriented and do not burden their defence sales with
extraneous political baggage

The four European governments have been arguing that an Indian
decision in favour of their aircraft would create defence and
technological partnerships with four major European countries, with long
term tie-ups with their defence sectors. India would have a
multi-nation relationship rather than with a single country.
Furthermore, with a more open approach to technology transfers and more
possibilities for India to participate in the further development of a
still not fully mature aircraft, India’s strategic goal of establishing a
larger indigenous defence manufacturing base could have been better
achieved.

India and France have had a long standing defence relationship.
French Mirages have served the Indian Air Force well for more than a
couple of decades and India has not been subject to sanctions by
France(unlike US and the UK in the past). France is a country with which
our defence relationship has been tried and tested over a long period
and therefore futher investment in it is without risk. France, in
addition, has maintained a relatively more independent defence
manufacturing base, which gives it more political space to act
independently on the international stage. It is therefore in India’s
interest that the French industry is not squeezed out of international
competition and that France remains an option for Indian acquisitions.
All these arguments would be in favour of a strategic choice in favour
of the French aircraft, more so as France was the first country with
which India began a strategic dialogue after our 1998 nuclear tests and
the first western country with which India established a strategic
partnerhip.

Whether India exercises a strategic choice while making defence
acquisitions begs the question whether it is always possible to do so.
There may be many factors that stand in the way of consciously making
“strategic” choices. What India wants may not be available from a
preferred source; the potential supplier may not be willing to transfer
technology to the extent India wants; conditions attached to the sale of
defence equipment may be too onerous; reliability may be an important
consideration; the price factor and financial terms are always a
critical element and so on.

A country’s strategic choices also depend on the international
situation at a particular point in time. India’s nonaligned policy
during the Cold War was an impediment in building a defence supply
relationship with the US, but it was not in building one with the Soviet
Union. The US brought the military alliance system right to the doors
of India, and this too impeded defence ties with the US. Not
surprisingly, the end of the Cold War saw India taking the initiative to
procure military equipment from the US by placing an order for weapon
locating radars.

Britain and the US were not sufficiently willing in the 1960s to
transfer technology and allow local assembly of western aircraft in
India and the Soviet Union was willing, and this prompted India to turn
to the Soviet Union for the acquisition of MiG 21 aircraft. The state of
relations between India and the Soviet Union at that time did not
necessarily justify this “strategic choice”- the Soviet Union did not
then (and now) take any favourable position on the Sino-Indian border
conflict, whereas the US did. However, the rupee payment arrangements
for the purchase of Soviet equipment served foreign-exchange deficient
India’s needs well.

India continues to make large acquisitions from Russia for a variety
of reasons. Russia has proved a reliable supplier; a high degree of
mutual trust exists betwen the two countries. Russia is willing to make
available its front line equipment to India. It has leased a
nuclear-powered submarine to India and is assisting in the Arihant
programme. Russian equipment is often considerably cheaper to procure.
In any case, with the Indian armed services so heavily dependent on
Russian equipment, it is very difficult for India to rapidly diversify
even if it wanted to. Upgrades and modernization of the existing
equipment prolongs the India-Russia defence connection. New acquisitions
are made or planned such as additional Sukhoi MK 30I aircraft and the
Multi-role Transport Aircraft (MTA) and the Fifth Generation Fighter
Aircraft (FGFA) in order to continue to buttress the strategic
relationship between the two countries with military orders. (Looking
back India took an important “strategic” decision to place large orders
on the Russian defence companies to help them survive after the demise
of the Soviet Union and the drying up of government orders for defence
equipment because of political and economic disarray in the country).

India-US defence relations have suffered because the US has chosen to
arm Pakistan as an alliance partner in earlier decades and now as a
major non-Nato ally. It is difficult for India to ignore this even as it
is willing to expand defence ties with the US. The US has a history of
imposing arms embargoes on countries on political grounds. This raises
concerns about the reliability of the US as a supplier. Unlike in the
case of other countries, the US attaches conditions to arms transfers
such as end-use monitoring that detract from a country’s sovereignty. US
concerns about the security of its technologies makes technology
transfers from it difficult. The recipient country cannot modify or
upgrade US supplied equipment through indigenous reasearch and
develpment as that is seen as a violation of IPRs.

The US tends to look upon arms sales to a country as a political
gesture to it, not as a commercial deal alone. The recipient country has
to “merit” receipt of military equipment even on payment. The
assumption is that the US possesses the most advanced technologies and
these are eyed by other countries. The US also believes that providing
arms to countries, even in troubled regions, helps in stabilizing peace
as it makes countries feel less vulnerable to outside threats. If a
country like India has to establish a deeper defence relationship with
the US it has to take into account these problematic factors in making
its strategic choice. The reluctance that still exists in opening the
throttle for procuring more from the US is explained by these aspects of
US arms sales policies and assumptions.

In the case of Europe there is greater sense of comfort in dealing
with them in defence matters as the Europeans are more commercially
oriented and do not burden their defence sales with extraneous political
baggage, though in the case of Germany human rights considerations have
prevented them from supplying certain kinds of equipment to certain
countries that can be used by their governments against local
insurgents. The links between the US and the UK defence industry creates
some uncertainties with regard to servicing of UK supplied equipments
carrying US parts that could be subject to an embargo were the US to
impose sanctions. It is for this reason that in acquiring the Hawk
trainer aircraft from the UK, India insisted that they carry no US made
parts. All in all, however, the power equation between individual
European countries and India is less unequal than with the US and
therefore India has a lesser sense of political vulnerability vis a vis
them. The French, with a more autonomous defence industry, are that much
more keen to preserve their share of the global market that is
dominated by the Anglo-Saxons, and therefore can be relied upon more not
to risk their reputation for political reliability.

A strategic approach to arms purchases therefore requires that India
take into account the political risks or lack of them in dealing with
supplying countries. It is clear that from this point of view India has
shown proof of such an approach in having a robust defence relationship
with Russia and a tentative one with the US. The latest opening to the
US in terms of defence trade has come after the trust generated by the
India-US nuclear deal and the establishment of a strategic partnership
between the two countries. A strategic approach also requires that no
overdependence is created on one single country as that can create
vulnerabilities even if the relationship with that country is friendly
and stable over a long period. Here, it can be argued that some
overdependence exists in relations with Russia, but that occurred as a
result of Cold War dynamics and western policies towards India, as well
as the huge financial advantage in conducting even defence trade in
rupees at a time of acute foreign exchange shortages. But even in that
period India kept a line open to the West with sizable defence
procurements from France, the UK and Germany and some from Italy. The
list of equipment bought from France since the 1950s is impressive- the
Ouragan, Mystere and Mirage aircraft, the Chetak and Cheetah
helicopters, radars, AMX tanks and so on. We also acquired the HDW
submarines from Germany.

Our real problem is that we have failed to develop a
large enough indigenous defence manufacturing base. If we were thinking
strategically we should have begun to fill up this lacuna in our defence
planning a long time ago

The need to diversify the sources of procurement would seem a
strategic necessity, though the interlinkages between western defence
companies is now such that there is hardly a pure national company. In
that sense, thre is no unalloyed strategic choice to be made.
Nevertheless, India has diversfied its sources of acquisitions, but this
creates the problem of maintaining vastly different inventories with
attendant increases in administrative, maintenance and manpower costs.
India now procures equipment from Russia, France, Israel, the UK, US,
Germany and Italy. In part this diversification of sources will occur
even more because of revisions in our system of procurement. We are
moving away from government to government procurement to international
tendering. Whereas the first offered scope for a ‘strategic’ approach,
the latter makes it essentially a techno-commercial transaction. The
change has been dictated by the need to make the system more transparent
in order to dispel charges of corruption. The L1 system has meant that
the lowest bidder wins irrespective of “strategic” considerations. It is
hardly possible under this system to buy more expensive equipment from a
“strategically” more important country if cheaper equipment is
available from a country less important in the strategic sense. In the
case of the MMRCA contract we have taken into account life cycle costs.
This may give some elbow room to buy initially more costly but superior
equipment. Our system, plagued by accusations of corrupt practices, has
resulted in companies being blacklisted and this further distorts the
availability of options.

We are today buying defence equipment from several countries. When
decisions are taken in the relevant Ministry and receive cabinet
approval, the defining approach is not strategic; it is essential
administrative and financial. For a strategic approach the foreign
policy angle has to factored in, but this is not done as the decision on
procurment is essentially the domain of the Defence and Finance
Ministries with no consulatation with the Ministry of External Affairs
and pro-forma approval by the cabinet.

Our real problem is that we have failed to develop a large enough
indigenous defence manufacturing base. If we were thinking strategically
we should have begun to fill up this lacuna in our defence planning a
long time ago. No country can have truly independent foreign and
security policies if it is dependent on its defence on procurement of
foreign arms. The strategic choice that we need to make is not to make
purchases of foreign weapons in accordance with what that might bring in
terms of building strategic partnerships with individual countries, but
be self-reliant as fas as possible in the field of defence.

Author is Member Advisory Board in Vivekananda International Foundation and Former Foreign Secretary